What Gets Lost in ESG's Swirl of Acronyms
- Media Manager
- Aug 7, 2023
- 2 min read
Microsoft Start
Written By: Alex Friedman, Steve Cain
Published: August 7th, 2023
About the authors: Alex Friedman is the chief executive officer and co-founder of Novata, a public-benefit company focused on environmental, social, and governance data in private markets. Steve Cain is a subject-matter expert on trends in ESG at Novata.
One of us (Alex Friedman) once worked in the Pentagon as a special assistant to the secretary of Defense and recalls well the first bewildering days of being overwhelmed in a sea of military-specific acronyms: CO, JCS, NCO, XO, OPSEC, CONUS, FOB, TDY, OER, OPR, to name but a few.
In time, they made sense. But more importantly, as with all topics of complexity, the key was to boil down the technical terms to their essence, make things simple and emerge with a clearer vision.
Decades later, in the most unexpected place, we have encountered an equally robust alphabet soup of acronyms. The place resides in the field of environmental, social and governance issues, better known by its moniker of ESG. Here, the abbreviations include ISSB, SASB, VRF, NFRD, CSRD, SFDR, TCFD, TNFD, CDP, GFANZ, GRI, IIRC, PAIs, SBTi and a host of others.
But just as at the Pentagon, the ESG alphabet soup can also be reduced to clarity, for behind these acronyms exist an overlapping group of regulators and nongovernmental organizations that are all driving toward a similar destination: enabling companies and investors to track not just financial results, but also material information about sustainability.
The International Sustainability Standards Board recently released two key reporting standards. It requires companies to disclose material information about sustainability-related risks and opportunities including governance, strategy, risk management and performance, alongside industry-specific information. The second standard, coming soon, will determine the specific requirements for climate-related physical risks, transition risks and opportunities.
